Question

Whether a market is competitive or a monopoly is determined by its degree of market power. In the real world, pure competition and pure monopoly do not exist—the real-world market falls somewhere between the two extremes. Why then do you think we study perfect competition and monopoly? What is the closest you have seen or experienced to pure competition or monopoly? Which do you think is preferable? Why?

Answer 1

The perfectly competitive market and monopoly are two extreme situations. The maximum output is attained in a perfectly competitive market while the lowest output is seen in the monopoly market. the actual real-world market is somewhere between these two extremes.

The government is committed to promote and sustain competition in the market. thus, in the actual world, there are few dominant firms and these firms tend to compete fiercely for market share and end up producing the output which is close to the perfectly competitive market. There are few instances of monopoly as well but these instances are rare, the government has control over such monopoly.

A perfectly competitive market scenario is more preferable. Since it maximizes the social welfare.